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UNIVERSITY 
BUSINESS ADMINISTRATION 



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J. C. CHRISTENSEN 



FINANCIAL SECRETARY 
KANSAS STATE AGRICULTURAL COLLEGE 



A PAPER READ BEFORE A CONFERENCE OF BUSINESS OFFICERS 

OF THE STATE UNIVERSITIES AND COLLEGES 

OF THE MIDDLE WEST 

CHICAGO, JANUARY 12 AND 13, 1912 



ALSO 

ORGANIZATION CHARTS 

FOR THE 
KANSAS STATE AGRICULTURAL COLLEGE 



PRINTING DEPARTMENT 
KANSAS STATE AGRICULTURAL COLLEGE 




UNIVERSITY 
BUSINESS ADMINISTRATION 



BY 



J. C. CHRISTENSEN 

FINANCIAL SECRETARY 
KANSAS STATE AGRICULTURAL COLLEGE 



A PAPER READ BEFORE A CONFERENCE OF BUSINESS OFFICERS 

OF THE STATE UNIVERSITIES AND COLLEGES 

OF THE MIDDLE WEST 

CHICAGO, JANUARY 12 AND 13, 1912 



ALSO 

ORGANIZATION CHARTS 

FOR THE 

KANSAS STATE AGRICULTURAL COLLEGE 



PRINTING DEPARTMENT 
KANSAS STATE AGRICULTURAL COLLEGE 



v* 



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APfi 29 1915 



IDEAS GLEANED IN A RECENT TRIP OF INSPECTION 
FOR THE STUDY OF UNIVERSITY BUSI- 
NESS ADMINISTRATION 



In considering the subject assigned to me it should be under- 
stood that whatever I may say is simply a layman's opinion of 
university business administration, as my connection with the 
business office of a college commenced only a few months ago. 
Last September, when I was called from the Banking Department 
of my State to take up the work of reorganizing the business 
administration of the Kansas State Agricultural College, I was 
almost entirely ignorant of the nature of the business conducted 
by a college or a university. After familiarizing myself in a 
measure with the work before me in my new field, I took a trip to 
visit the leading colleges and universities in the northern and 
eastern parts of the United States to try to discover how the 
problems which were confronting me had been solved in other 
states. I soon discovered that the problems of Kansas were the 
problems of every other state and that the subjects which were 
interesting me were engaging the attention of the business mana- 
gers of every institution I visited. 

The time devoted to my trip of inspection was so brief that it 
was impossible to get more than a superficial view of matters, but 
I gained a number of ideas which have been helpful in my work. 
I devoted, on the average, one day to each institution, and most of 
that time I kept the business manager busy explaining how he 
conducted his business. 

In presenting my subject to you it is not my purpose to go into 
details in regard to matters observed by me. I shall confine my 
remarks to a few general observations, and later I shall suggest 
an outline for the organization of the business administration of 
a university. 

HISTORICAL DEVELOPMENT OF AMERICAN UNIVERSITIES 

The history of one college is practically a duplicate of the his- 
tory of every other college or university in America. Most of 
our universities have grown from small colleges. In the early 



4 University Business Administration 

days the college consisted of a few professors, a building or two, 
and very limited equipment in libraries and laboratories, and still 
more limited resources in funds with which to pay current ex- 
penses. The principal, and almost the only large, item of expense 
was the salaries of the professors and instructors. The presi- 
dent was the business as well as the educational head of the 
college, but his energies in a business way were too often required 
in building up the resources of the institution instead of in organ- 
izing the administration of the business activities. 

During the past twenty years there has been a remarkable 
growth in American educational institutions, and with this growth 
the business of these institutions has increased enormously. Not 
very. many years ago the annual budget for current expenses of 
leading American universities did not exceed three or four hun- 
dred thousand dollars, while to-day the two-million mark has been 
approached by several institutions. While the salary list still 
remains the large part of the budget, the annual expenditures for 
equipment, laboratory supplies, libraries, collections, publica- 
tions, heat, power, light, and the maintenance of the physical 
plant, has become very large. 

EARLY ORGANIZATION OUTGROWN 

In my trip of inspection I was impressed with the fact that the 
American university has outgrown its early organization, but I 
also found that in practically every institution visited, steps were 
being taken to reorganize the business administration. Without 
doubt, it is time that something be done in that line. The Ameri- 
can university has become a large business corporation, and its 
business should be conducted according to the approved methods 
of modern corporations. There is no reason why the business of a 
university should not be conducted in a business-like way, and 
there is every reason why it should be. To place the business 
upon a thoroughly sound and efficient basis will not in any way 
interfere with the proper freedom and development of the univer- 
sity as an educational institution. 

NEED OF BUSINESS ORGANIZATION NOT ALWAYS APPRECIATED 

College and university authorities are apparently lacking in 
appreciation of the necessity for the proper organization of the 
business offices. This accounts for a great deal of the looseness 
in the business administration which has been found in several 



University Business Administration 5 

institutions. In order to centralize authority and to fix responsi- 
bility definitely, it seems necessary that all the business of a uni- 
versity should be placed in charge of one man with sufficient 
authority to enforce his demands. This important principle has 
not been fully appreciated in several of our largest universities in 
which attempts have been made to introduce modern business 
methods. With the growth of a university and with the constant 
increase of business matters, the business offices have sometimes 
been organized into several distinct departments, but without a 
head over all of the departments. One university recently put in 
a purchasing department, but made the fatal error of not making 
that department a part of the business organization of the univer- 
sity. The purchasing agent had no one to appeal to in cases of 
disputes except the president of the university, and in this par- 
ticular case that manner of appeal was practically worthless, as 
far as the efficient management of the purchasing department 
was concerned. This university has now made the university 
treasurer the business manager, and the president acts through 
him. All business offices are under control of the business. man- 
ager. 

CONCENTRATION ESSENTIAL 

An objectionable manner of conducting business in several 
universities has been shown in the tendency to scatter through a 
number of offices what should be done in one office and under one 
authority. If I should be asked to name the one thing which I 
consider the most important step for an efficient business organi- 
zation, I would say concentration. There should be concentration 
not only in the business but also in the educational administra- 
tion. This scattering has frequently been caused by powerful 
deans or heads of departments assuming powers and duties which 
properly belong to the executive offices of the university proper. 
In some institutions the powers and duties of a dean are not 
clearly defined, and this lack of definite authority has caused con- 
fusion in the business offices. Without doubt, much of the detail 
work which is now being done in the offices of cleans and heads of 
departments, in many institutions, could be better done in cen- 
tral offices under central authority. This applies not only to busi- 
ness administration, but also to educational matters. I find that 
several universities are now at work undoing what had been done 
several years ago in scattering authority and executive duties. 



6 University Business Administration 

EDUCATIONAL AND BUSINESS ADMINISTRATION 

A plan of organization which is being worked out in several uni- 
versities provides for a division of the administrative duties along 
two lines: first, educational; and second, business. The presi- 
dent of the university is the head of the educational division as 
well as of the entire institution; but the details of all business 
matters are placed in charge of a business manager or comptroller. 

The business manager should be of sufficient calibre to assume 
entire control of all business matters, and all officers who deal 
with business matters should report to him. The business mana- 
ger' would also be the logical secretary of the Board of Regents, 
or Trustees. It is highly important that the business manager 
be present at all meetings of the Board so that he may see that 
all matters relating to the business side of the university are 
properly looked after. It is seldom satisfactory to delegate such 
matters to persons who do not have a first-hand knowledge of the 
things to be presented. 

PLAN OF BUSINESS ORGANIZATION 

The outline which I shall give is capable of indefinite expan- 
sion. It is not original, but is a result of my observations of 
some of the best organization work that I discovered on my re- 
cent trip. This plan presupposes the organization of the uni- 
versity as above given with a division between educational and 
business activities, but I give here only the plan for the business 
organization. 



University Business Administration 



OUTLINE OF BUSINESS ORGANIZATION 



Business Manager* 



The Business Manager is the head of business affairs. The 
President and Board of Regents act through him in the details 
of business matters. 



1. Business Office 

a. Accounting Department 

Chief Clerk 
Cashier 
Bookkeeper 
Voucher Clerk 
Inventory Clerk 
Time Clerk 



b. Purchasing Department 

Purchasing Agent 
Order Clerk 
Stenographer 
Receiving Clerk 
Stores and Storekeeper 



2. Superintendent of Buildings and Grounds 

The Superintendent has charge of the physical plant, and is 
superintendent of construction. 

Superintendent 
Draftsman 
Clerk 
Inspector 

a. Heat, Power, Light, and Water 

Superintendent 

Assistants 

Laborers 



*The title of Business Manager is used to designate the chief business officer of a univer- 
sity. The title varies in different institutions, as Comptroller, Bursar. Financial Secretary. 
Treasurer, etc. 



8 University Business Administration 

b. Repair Gangs 

Carpenters 

Painters 

Plasterers 

Stone Masons 

Plumbers 

Electricians 

Etc. 

c. Janitors and Caretakers 

Head Janitor 
Assistant Janitors 
Cleaners 
Caretakers 
Night Watchman 
i 

d. Grounds, Roads, and Walks 

Gardeners 
Laborers 

e. Fire Protection 

/. General Care of Property, Police Duty 

3. Consulting Engineers and Architects 

For all new work and original planning, or material alter- 
ations to grounds, buildings, etc. 

With an organization as above outlined, the proper machinery- 
would be provided for efficient management and for the installa- 
tion of an adequate accounting system. The accounting in most 
of our universities and colleges has, without doubt, been very 
unsatisfactory. To improve matters and to make it possible to 
install proper systems, it will be absolutely necessary to have 
the proper organization. 

FINANCIAL REPORTS 

The Carnegie Foundation for the Advancement of Teaching has 
called the attention of colleges and universities to the unsatisfac- 
tory manner in which financial reports of educational institutions 
are frequently made. I have examined a number of reports, and 
I must say that very few of those examined have been made from 
an accountant's standpoint. It seems reasonable to expect that 
the financial reports of educational institutions should give the 



University Business Administration 9 

same information that is found in the financial reports of business 
corporations. The financial report should be a summary of the 
books of the institution, and therefore, if the proper reports are 
to be made, it will be necessary for all colleges and universities to 
install sets of books in place of a collection of registers, as is 
found in some institutions at the present time. The question that 
arises is: What should a published report give? The following 
items will give the necessary information a report should contain : 

1. A balance sheet giving all assets and liabilities, 

with the proper supporting schedules. 

2. A statement of receipts and disbursements, with ap- 

propriate analysis. 

The uniform reports recommended by the Carnegie Founda- 
tion for the Advancement of Teaching give valuable suggestions 
along this line, and, if followed by the different institutions of the 
country, it will become possible to get reliable information relat- 
ing to the business transactions of our colleges and universities. 

STATE EDUCATIONAL INSTITUTIONS AND STATE ACCOUNTING 

I believe that a large number of those present at this meeting 
come from state institutions, and therefore I wish to say some- 
thing which concerns state institutions only. My inspection has 
shown that there are very few states in which the business of 
educational institutions is not hampered by obsolete and cumber- 
some methods of state accounting. It is impossible for a state 
institution to install a satisfactory system of accounting unless 
modern methods prevail at the State House. When accounts are 
paid only once each month, and then only after tedious delays at 
the offices of the State Auditor and the State Treasurer, the insti- 
tution is the loser financially, and the bookkeepers at the institu- 
tion are kept wondering whether it will do to close up the books 
for fear that the Auditor of State may reduce a voucher five cents 
on account of what he may consider as a too expensive meal item 
in a personal expense voucher. There is no reason why a state 
educational institution and a state should not do business in a 
business-like way. But to accomplish that it will be necessary to 
have some new legislation in most states. The Ohio State Univer- 
sity is fortunate in that the State of Ohio has adopted modern 
methods in state accounting, but Ohio is the only state visited 
by me in which such legislation has been enacted. 



10 University Business Administration 

In this connection I wish to say that it would be a fortunate 
thing if the business managers from state institutions who are 
here should get a movement started which would bring about 
modern methods of accounting in every state here represented. 
The colleges and universities could do no better service to the 
state than to secure such reforms. And such reforms are re- 
quired for a thoroughly efficient business administration of state 
educational institutions. 

COST ACCOUNTING 
The subject of cost accounting in relation to educational insti- 
tutions has been suggested. At Harvard a complete cost system 
was installed by a firm of accountants, but I was told that the 
authorities there doubt very much the advisability of carrying on 
such a system. It seems to me that it is not advisable to make an 
analysis of the cost of operation of an educational institution in 
the same manner as a manufacturer would do to determine the 
cost of making an automobile. In the first place, it is difficult to 
fix a basis for cost accounting in an educational institution. After 
a basis has been fixed, the results obtained would tend to give 
wrong impressions to the uninformed. A university may find it 
of advantage to maintain a department of instruction in which 
very few students enroll, but a comparison of such a department, 
in cost per student-hour, with another department in which in- 
struction is given by lectures to large bodies of students, will 
furnish the demagogue with a weapon which might be used to the 
disadvantage of the university and to the detriment of the proper 
development of education.- The cost per student-hour will not 
give much information of value in regard to the work of an educa- 
tional institution. 

PURCHASING DEPARTMENT 

The plan of organization as suggested in my outline contem- 
plates the organization of a central purchasing department. I 
will leave it to those who have had more actual experience with 
such a department to discuss the plan of operation and its advan- 
tages. There should be no question as to the advisability of such 
a department, as without it, it will be. impossible properly to 
transact the business of a university. But in this connection I 
wish to say this, that business men who have not had actual 
knowledge of the business of a university frequently have wrong 



University Business Administration 11 

ideas as to the management of a central purchasing department. 
In many manufacturing enterprises the purchasing is confined to 
buying large quantities of a few things, while in a university 
we have almost an endless number of things to be bought in small 
quantities, from an endless number of places. The central pur- 
chasing department cannot accomplish the saving that such a 
department might accomplish in manufacturing enterprises, but 
the saving would undoubtedly be considerable, anyway. 

CENTRAL STORE ROOM 

In connection with the central purchasing department, a store- 
room should be provided. Central stores have been established 
at a few institutions, but as yet none, as far as I know, have been 
fully developed. It would seem that a central storeroom all under 
one management, rather than several storerooms, would be the 
proper arrangement, as cost of operation could thereby be re- 
duced. 'A university uses an endless amount of things that could 
just as well be carried in stock for greater convenience. 

CONCLUSION 
My observations have shown that there is an awakening 
throughout the country in regard to a reorganization of the busi- 
ness administration of colleges and universities. During the past 
year several colleges and universities have created the position of 
business manager, while in others the powers of existing busi- 
ness officers have been increased to the end that all business mat- 
ters might be centralized. Only a few weeks ago the University 
of California placed all business matters under the control of a 
newly elected comptroller. The tendency all over the country is 
along the lines outlined in this paper, and it is evident that the 
proper management of our large colleges and universities cannot 
be obtained in any other w r ay. 



ORGANIZATION CHARTS 



KANSAS STATE AGRICULTURAL COLLEGE 



PREPARED BY 

J. C. CHRISTENSEN 

Financial Secretary 
Kansas State Agricultural College 



Organization Charts 15 



INTRODUCTORY NOTE 



The accompanying charts have been prepared for the purpose 
of showing, in graphic form, the organization of the Kansas State 
Agricultural College into departments and divisions, and to show 
the principal lines of administration. An attempt has been made 
to present the best features of modern university and college 
organization as the same have been developed in leading American 
institutions, with such modifications and improvements as obser- 
vation and experience have suggested. 

It is believed that the charts have been made sufficiently plain 
to show the general plan of organization, but several points may 
require special attention. The charts are intended to emphasize 
the following : 

1. The centralization of all business matters in the 

business office, with the lines of business admin- 
istration Clearly defined. 

2. The organization of a Department of Building and 

Grounds to have charge of the operation and 
maintenance of the physical plant and of new 
construction. 

3. The centralization of all academic records in the 

registrar's office and the enlargement of the du- 
ties of that office. 

Experience has shown that there are many matters connected 
with the administration of a college which are of a business na- 
ture, and such matters can be administered as efficiently by a 
college as by a private corporation if only the necessary organiza- 
tion is provided. This applies not only to purely business mat- 
ters, such as the operation and maintenance of the physical plant, 
the construction of buildings and other improvements, the pur- 
chase of equipment and supplies, and the keeping of accounts, 
but also to the work of the registrar's office. The plan here out- 
lined provides for the fullest application of business methods 
without decreasing academic efficiency. 



\ 



REGISTRAR 



FACULTY 

COMMITTEES 




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